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Tax implications of renting out property
BulletCraig
Posts: 85 Forumite
Need some advice here. Someone I know owns a flat but has moved to another city with the company they work for and is renting a property there as they don't want to sell their property. They are planning to rent their flat out simply to cover their mortgage (or maybe even for less than their mortgage if they can't get someone in) but it has been mentioned to them that this may be seen as additional income and if the inland revenue find out they would be liable to pay tax on it. Does anyone know if that is correct? Surely as they're not making money on it (and in fact may be losing money if they can't get the full rent for it) they wouldn't have to pay tax?
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It is classed as taxable income. If your friend makes a profit they will need to pax tax on any profit made. They will need to declare their profit or loss to the tax office each year. If they do make a loss then they wont pay any tax until they make a profit.
As far as working out whether they are making a profit or not, the taxable amount is worked out on the profit minus allowable expenses. Allowable expenses include agency fees, service charges, mortgage interest, gas/energy certifcates etc.
In my case i rent out our flat for 865 a month but the mortgage interest, service charge and agency fees mean i end up -15 worse off, so i dont pay any tax although i do need to still declare the loss.
This has lots of useful information:
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_100134350 -
They also need the permission of the mortgage provider, and possibly the freeholder.Declutterbug-in-progress.⭐️⭐️⭐️ ⭐️⭐️0
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You do have to declare the income, but the other side to that is that you also keep accounts of all your expenses etc, so probably won't be much tax implication but it is very important to declare everything and be above board.
If a tenant goes in and claims housing benefit for instance the inland revenue can see the records of who it is paid to etc and if they are not declaring an income from letting ....I am a Mortgage Adviser
You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
Bulletcraig - are you talking about your own LL?0
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Should be fairly easy to run at a loss unless a LL is on a great tracker deal, in which case he is a happy bunny anyway. Sounds like your friend will have no tax to pay.0
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Should be fairly easy to run at a loss unless a LL is on a great tracker deal, in which case he is a happy bunny anyway. Sounds like your friend will have no tax to pay.
Strange view. Why run at a loss?
If you do have a tax liability it means you're making a profit.
Little point in subsidising a loss making business in the hope of one day making a capital gain. Particularly in the current market.0 -
Well I don't know why run at a loss, I suppose it means make sure all expenses that can be claimed for are. With rental yields so low I expect it is easy enough to be at break even/sight loss. As for why do that, dunno, perhaps an attempt to stem capital losses/ wait for gainsThrugelmir wrote: »Strange view. Why run at a loss?
If you do have a tax liability it means you're making a profit.
Little point in subsidising a loss making business in the hope of one day making a capital gain. Particularly in the current market.
Could be a long wait. Or maybe if someone just wanted to hang onto a property to return to it later 
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Well I don't know why run at a loss, I suppose it means make sure all expenses that can be claimed for are. With rental yields so low I expect it is easy enough to be at break even/sight loss. As for why do that, dunno, perhaps an attempt to stem capital losses/ wait for gains Could be a long wait. Or maybe if someone just wanted to hang onto a property to return to it later
I suggest a long wait, in the meantime :beer:0
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